“Near the money” refers to an option contract whose strike price is near or close to the current market price of the underlying security.
A call option is near the money when its strike price is lower than the current market price but extremely close to it.
A put option will be considered as near the money when the underlying securities strike price is higher than the current market price but extremely close to it.
For example, a stock option with a current market value of Rs. 310 and a strike price of Rs. 300 would be considered near the money as the difference between the present market value and strike price is only Rs. 10.
In other words, near the money option is one whose current market price is close to the strike price but not exactly the same.
Here are other states of option moneyness;
Most of the time near the money options are considered as at the money as it’s very rare for options prices to line up exactly with the strike price.
Intraday traders select near the money option to trade rather than at the money (ATM), in the money (ITM) or out of the money (OTM) options.
